The Millennial Lowdown: How this Up-and-Coming Consumer Group Is Changing the Game for Retailers

As Millennials emerge as the next consumer generation, retailers are recognizing that this large, connected and tech-savvy demographic will continue to grow as a driving force in the economy during the decade ahead. In fact, they have already put an impressive stake in the ground. As my colleague Ted Vaughan noted in his recent blog post, retailers embraced a clear strategy  to help drive growth during the 2014 back-to-school season: Home in on Millennials—an age group with its own burgeoning buying power and a propensity for big-ticket purchases such as electronics and furniture. To put it into perspective, the 80 million Millennials in the U.S. spend approximately $600 billion annually, a number expected to rise to an estimated $1.4 trillion—or about 30 percent of all retail sales—by 2020, according to Time. By that point, they will account for one-third of the adult population, as well.

This increasingly influential consumer cohort is laying the foundation for an entirely new consumer model—one that redefines the product preferences and purchasing habits of the baby boomer generation and demands that retailers revamp their strategies in order to effectively connect with the values and lifestyles of this up-and-coming trillion-dollar demographic.

It may not be so easy for retailers, however. So far, Millennials have earned a reputation for being unpredictable and therefore difficult to market, rendering them a challenging group for retailers to bucket. Despite their apparent elusiveness, though, a number of notable, more established patterns of buying behavior have emerged, offering retailers and brands a unique window into the minds of a consumer generation that’s still evolving in its preferences and behaviors.

With that in mind, as retailers rethink their marketing, merchandising and overall business strategies in order to more effectively attract this key age group, here are three trends they should keep top of mind:

Millennials are price-conscious and pragmatic, having come of age during the Great Recession. According to a recent study by The Intelligence Group (TIG), 36 percent of Millennials claim they only make purchases they deem as necessary, stumping retailers and marketers who rely on impulsivity with constant in-store and online deals. To stay ahead of this particular behavior, we expect that retailers who feature low pricing for quality merchandise—as well as consistent pricing across channels—will likely outperform competitors.

Millennials rely heavily on the internet and social media for shopping and researching products. Specifically, according to the data in a recent Forbes article, 72 percent of Millennials research and shop their options online before buying, looking at price comparisons, peer reviews and social networks for information. While they may ultimately spend a higher share of dollars online compared to other generations, according to a recent Reuters article, many Millennials primarily care about what their personal networks think and say about products, and that the retailers they follow have an appealing social presence. In fact, 32 percent of Millennials claim they have quit purchasing from brands that have “unacceptable” social practices, according to the aforementioned Forbes article. Retailers should respond by telling a cohesive and engaging online story and keeping pace with consumer desires.

Millennials shop for entertainment. Results from the same TIG study reveal that 50 percent of Millennials say they browse for items regularly without the intention of purchasing. According to a recent NPD Group report, overall conversion rates are lowest among Millennials. To stay ahead, both brick-and-mortar and online retailers must provide compelling destinations for shoppers, along with entertaining and memorable shopping experiences. More specifically, retailers can satisfy consumer demands for integrated, seamless and customer-centric shopping experiences by offering personalized interactions and consistency across channels.
There’s no denying that Millennials are transforming retail as smart, demanding and pragmatic shoppers. For ongoing success, retailers are now tasked with understanding this peculiar and evolving demographic—not only the products and prices they want, but also the experience and the speed that they have come to expect. 

As we enter the 2014 holiday shopping season, how is your company attracting and engaging Millennial shoppers?